Asian markets soar as war nears

Bush issues 48-hour ultimatum to Iraqi leader

By

MarikoAndo

TOKYO (CBS.MW) -- Asian stock markets surged, the dollar rose against the yen, and oil prices fell Tuesday as the U.S. ultimatum on Iraq left financial markets bracing for a war, barring a last-minute decision by Saddam Hussein to yield to President Bush's demands.

Bush said in a nationally televised address that the Iraqi president has 48 hours to go into exile or face military action. The announcement marked a decision by the U.S. and its allies to abandon its diplomatic efforts that failed to get Baghdad to disarm. See full story.

Following the speech, investors went on a broad-based buying binge that showed they are betting on short and decisive campaign against Iraq, analysts said.

Tokyo's Nikkei Average ended up 82 points, or 1 percent, at 7,954.46. South Korea's Kospi rebounded 22 points, or 4.3 percent to 537.31, after sinking more than 4 percent on Monday to end at its lowest level since October 15, 2001.

In other regional markets, Taipei gained over 4 percent, Sydney rose over 3 percent, while Singapore and Hong Kong were both up more than 2 percent.

After weeks of on-and-off signs that the United States would seek to resolve the crisis through the United Nations, Bush's speech erased any doubt that the dispute would be settled on the battlefield.

"The market has already factored in negative concerns accompanied with this war...such as a possible delay in the U.S. economic recovery and a fall in consumer and corporate spending," said Yasuo Ueki, an independent analyst. "Both Tokyo and U.S. stock prices have hit the short-term bottom and are expected to rebound for a while, unless signs surface that a war will be prolonged."

Gold rallies, crude falls

With the drumbeat of war sounding loud and clear, spot gold rose to $337.90 per ounce in Asian trading hours, up $1.80 from the New York closing.

Crude prices fell as much as 2.8 percent to $33.97 a barrel in after-hours trading on the New York Mercantile Exchange, as traders bet a quick war in Iraq may trim the so-called war premium.

On the currency markets, the dollar rose to 118.57 yen in afternoon trade in Asia, against 118.50 yen in New York late Monday.

The Japanese government has decided to keep the stock markets open even after a possible Iraqi war starts, but will impose stricter limits on price fluctuations, said the Nihon Keizai daily.

Meanwhile, Prime Minister Junichiro Koizumi called on his Cabinet to carefully monitor the financial markets and cooperate with the Bank of Japan to prevent any disruptions as a result of a war in Iraq. Koizumi is scheduled later in the day to voice Japan's support for the military campaign against Iraq.

The markets got some also welcome news from Japan's new central bank governor, who said that targeting an inflation rate could be "one of the important tools" to stop falling asset prices and revive the stagnant economy. Read full story.

"Market players are scooping up wide range of shares, and this trend would continue for a week or so," Ueki said. "But after that, people are likely to become selective. Airlines and travel-related issues are likely to come under pressure in the situation like this."

Honda Motor
HMC, -0.57%
(7267) was up 1.5 percent at 4,040 yen. Honda late Monday said it will begin selling cars in South Korea later this year, marking the second Japanese automaker to enter the fast-growing South Korean market after Toyota. See full story.

Kenwood (6765)
KNWCF
leaped 20 percent to 169 yen. Shares rose after Daiwa Institute of Research on Tuesday said that the audio equipment maker's revitalization plan was making good progress.

Exporters soar

South Korea expressed support for the military action in Iraq, saying that Iraq must fulfill its obligation to disarm promptly and completely, according to local media reports.

Korean Air
KRNRF
shot up 14.6 percent to 10,600 won after oil prices fell. Still, shares are down 20 percent so far this year. Asiana Airlines, which is traded on the over-the-counter Kosdaq, rallied 9.5 percent, to 2,200 won.

In Taipei, the main market index soared 182 points, or 4.2 percent, to 4,539.72 points.

China Mobile jumps after 2002 results

China Mobile
CHL, -1.32%
(0941) rose 6.7 percent to HK$16.75 after announcing that its annual net-profit rose 17 percent over the year to 32.7 billion yuan ($4 billion) in 2002. The results came in line with analysts' expectations. Sales grew 28 percent to 128.6 billion yuan, said the company which had nearly 120 billion subscribers at the end of January.

Richard Li's telecommunication firm PCCW
PCW
(8), which is due to report earnings on Thursday, jumped 2.7 percent to HK$4.75.

Singaporean stocks jumped after the Monetary Authority of Singapore, the city-state's central bank, said it was ready to act during volatile periods to ensure financial market stability.

The Straits Times Index rose 3.2 percent to 1,274.12, led higher by a 3.9 percent jump in Chartered Semiconductor Manufacturing
CHRT, -0.60%
to S$0.66.

Australia to join war on Iraq

Australia's All Ordinaries Index climbed 3.5 percent to 2,804. In Canberra, Prime Minister John Howard said Australia would join the "coalition of the willing" in any U.S.-led military action vs. Iraq.

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